May 21, 2020

For some taxpayers, the time may come when the IRS audits their income tax return.

There are two solutions taxpayers can take. One is to challenge the IRS’s proposed assessment in Tax Court or pay the amount, file a refund request. If rejected, taxpayers can file a refund suit challenging it in federal district court or the court of federal claims. But since court time is time-consuming, taxpayers often choose the secondary solution: confront the IRS Office of Appeals.

Overview

To dispute the revenue agent’s assessment, the taxpayer must file and write a logical and legal appeal that fights against the Revenue Agent Report within 30 days of the notice. This process allows the taxpayer the chance to overturn the IRS’s decision.

While an ideal resolution is to win and owe no additional tax, the seriousness of the appeal must be written professionally and presented with supporting evidence in favor of their arguments.

In short, the taxpayer’s appeal must meet a list of the required information. 

1. Contact information of the taxpayer
2. A descriptive statement explaining the reasoning behind the appeal of the proposed assessment
3. A copy of the proposed changes
4. Identification of tax periods or years
5. A detailed list of changes the taxpayer does not agree with, reasons why, facts supporting their position, and legal authority the taxpayer relies on; and
6. A signature to verify the disputes are true

POV from an appeals officer

When evaluating the appeal, the appeals officer will use judgment on the hazards of litigation. The officer will look into the credibility, interpret the taxpayer’s facts, determine whether their points are conflicting, inconsistent, incomplete or missing.

Valuable Tips

With all that in mind, the format of the appeal is also vital, as it should be visually appealing for the revenue agent. Taxpayers should consider including dividing sections with clear subtopic headings, detailed bulleted lists for each argument, and easy-to-follow diagrams and tables.

As with any written document served to government agencies for reviewing purposes, taxpayers must continuously edit their appeal to clear any chance of misinterpretations by the revenue agent. The appeals process lives on the basis of timeliness, so taxpayers should also avoid criticizing how their audit was misjudged and vilifying the appeals officer.

Takeaways

Not only does the taxpayer hold the intellectual and creative power to write and serve an exemplary appeal, but 85% of appeal cases are resolved within one year of request.

By identifying weaknesses against the revenue agent’s disagreements, providing copies of documents supporting all positions, citing and applying relevant laws of the Internal Revenue Code, a taxpayer will find this procedure advantageous in negotiating for improved legal rationalizations.